US-China trade war affects Vietnam's economy

Updated at Tuesday, 10 Jul 2018, 08:08

The Hanoitimes - Vietnam might see both negative and positive impacts from the US-China trade war so that local firms should closely monitor the market situation, prepare to adjust their operations and redefine export markets to avoid bad consequences and capitalize on opportunities from the conflict, experts suggested.

The US and China on July 6 slapped duties on US$34 billion worth of each others' imports, escalating their conflict and suggesting there was little sign the dispute will soon end.

Vietnam's export growth is forecast to reduce by 0.3 percentage points in 2019.

According to experts, with the US and China finally formalizing tit-for-tat import tariffs, Vietnam will be affected.
Vu Tien Loc, chairman of the Vietnam Chamber of Commerce and Industry (VCCI), said that at the moment, the direct and immediate impacts on Vietnam's exports will not be much as goods subjected to the tariffs by both the US and China are limited (including Chinese technology products and some US agricultural products such as maize, soybeans and meat, which aren't Vietnam's key export staples).
However, in the long run, it will be difficult to predict the impacts if the war continues to escalate and more tariffs are imposed, Loc said, explaining that being a small economy with the US its largest export market and China its largest import market, Vietnam will surely be affected by the confrontation.
Tran Toan Thang, head of the World Economic Department of the National Centre for Socio-Economic Information and Forecast (NCIF) under the Ministry of Planning and Investment, said that the conflict will have adverse impacts on global growth, causing a domino effect on Vietnam's exports.
Thang forecast that Vietnam's export growth rate will be reduced by 0.3 percentage points in 2019 and will continue to hit in 2021-2023.
Besides, facing difficulties entering the US market, Chinese goods will shift to other markets, including Vietnam, which may cause Vietnam to suffer a higher trade deficit with China, Loc said.
Additionally, as exports to the US fall, more Chinese goods will be consumed in the local market, causing difficulties for Vietnam's exports to China. The growth rate of Vietnam's exports to China, which reached 30% in 2017, may be negatively affected.
According to Loc, at a broader level, the US-China trade war may result in changes to global trade, causing Vietnam's exports to face fiercer competition in both other foreign markets and at home.Seizing opportunities
On the other hand, Loc said Vietnamese businesses can take advantage of the opportunity to boost exports of products that the Chinese versions have high tax rates in the US, and vice versa in China.
Echoing Loc, Thang said the conflict would give Vietnam a good chance to export to the US.
In addition, Thang said, amidst the conflict, FDI capital and its production chain will move from China to Vietnam as labor costs in Vietnam are lower than those in China. The government therefore should rapidly promote the foreign investment flow into Vietnam.
Loc suggested exporters closely monitor the market situation, not only in the US or China but also in other markets. They should prepare to adjust their production, business, supply and markets flexibly.
The firms should also seek other stable and more favorable export markets besides the US and China, especially those Vietnam has signed free trade agreement with.
Economist Pham Chi Lan also suggested that Vietnamese firms expand their partnership to at least three markets to avoid dependence on a particular market.
Such a strategy will help Vietnamese firms survive and exploit new opportunities in the context of a global trade war, she said, suggesting that Vietnamese firms should increase their influence in other markets outside the US and China, such as the EU.
The passage of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership without the US's participation is a good way to deal with the unpredictable policies of the US and China at the moment, Lan said.
In the domestic market, Loc suggested that local firms co-operate with each other to take actions when necessary. For example, firms can use legitimate trade remedies such as anti-dumping, anti-subsidy or safeguards to fight unfair foreign trade practices.